Tesla: Model 3 Demand May Force Quality Downgrade

About: Tesla, Inc. (TSLA)
by: Bill Maurer

Company has detailed over 325,000 Model 3 reservations.

Model 3 features page has been updated, but not in a good way.

Higher production may result in lower quality, add-ons with higher prices.

Tesla Motors (NASDAQ:TSLA) fans and investors celebrated earlier this week when the company announced it had already received more than 325,000 reservations for the upcoming Model 3. This amount of demand was much higher than expected, which may impact how the company looks at the vehicle. Tesla's website has already changed its headline page for the Model 3, with the new result appearing to be a downgrade in quality and features.

In the images below, you can see how the Model 3 has been "downgraded" in a sense. The left half shows what the original Model 3 page looked like, and the right side shows what is seen currently.

(Source: StreetInsider article via Electrek.co)

The bottom three lines have changed, and these might be serious issues for those looking at the car. What does "designed for safety" actually mean? It certainly doesn't mean a 5-star safety rating in all categories, or Tesla wouldn't have made the change. Tesla really doesn't want to promise a perfect safety rating and then not deliver, given its already growing list of failed promises.

The other key changes are in regards to the autopilot and supercharging ability. While it originally appeared these could be standard features, it is possible that these might be options or not even available. Options could jack up the cost of the vehicle from its $35,000 starting price, which most people realize will be a base model. Those also not early on the reservation list probably won't be able to take advantage of certain tax credits, which might impact overall demand in the long run.

So why would Tesla appear to "downgrade" the car that so many are waiting for? Well, as the company has admitted for the Model X, the vehicle was so complex it required too many parts. Production has been much slower than expected, meaning consumers have had to wait a lot longer for deliveries. Tesla wants production to be as smooth as possible for the Model 3, because production of just a few hundred vehicles per week won't cut it when demand is this high.

In the end, the Model 3, particularly its base version, may not be as good as many had hoped for. As most will expect, a top of the line version will likely set you back tens of thousands more. For Tesla to achieve production levels needed to satisfy demand in a reasonable timeframe, it cannot design a vehicle as complex as the Model X. Consumers will potentially be disappointed in the quality/price of the vehicle, but this likely needs to be the case if you want to see a Model 3 in your driveway before the next decade starts.

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